Sunday 6th March, 2005


Money for old age

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Money Matters
with Raziah Ahmed

The movie, Phantom of the Opera, begins with an auction at the Paris Opera House in 1917, with two aged characters, in a financial win-loss situation. The film is a story of love and loss.

Both the Phantom and Raoul claim the hand of the fair Christine, but in the end, Christine is dead, and the surviving female cannot even win the bid for the monkey with the cymbals.

The question is not whether the monkey is worth it; the fact of the matter is that after an illustrious career, the lead female opera singer should have had the ability to win the auction. So where does money come from when you’re old, and no one will employ you?

Money for retirement can only come from savings in the form of pensions, or from the conversion of assets into cash. If assets, such as real property, are being purchased to fund retirement, such property must be titled to make it easy to sell.

Ideally, such property should be located in prime residential areas, or in central business districts, kept for a large number of years, and then sold in contemplation of retirement.

The cash realised from the sale of the property should then be structured, with absolute guarantees, to last for all of the lifetime of the individual at least, or structured for the lives of two persons, until the second person dies.

It is easy to cash in intangible investments such as mutual funds, CDs, and policies. It is not easy to convert tangible property to cash, and very often, the most significant tangible property is the primary residence of the retiree itself. One simply cannot sell away one’s home, to satisfy a need for cash in old age. Where would one live?

But you could sell your house, and continue to live in it, even as you use the money from the sale of your house, to meet your monthly needs!

The way to accomplish this is by affecting a transfer of the property with retention of life interest. A new deed can reflect this relationship. Of course the sale price will also reflect that the retiree will continue to enjoy the use of the property, even though the property is sold to someone else. This will improve the cash flow situation for the retiree.

The sale price can actually be negotiated in at least two ways. First there can be the normal ten per cent down and the balance in 90 days, or otherwise the sale can be by virtue of annual installment payments over a period of years. Remember the original owner retains a right to live in the property until death.

These are not run-of-the-mill transfers, and careful thought must go into the phrasing of the deed. Careful analysis must also be undertaken to determine the kinds of persons who will involve themselves in such relationships. Clearly such an arrangement will be inappropriate if the buyer contemplates own occupation of the property in short time. However, the idea is one whose time has come!

Christine’s aria: “All I want is freedom, a world with no more night, and you always beside me, to hold me and to hide me” may well express an innate fear of deprivation. But the Phantom’s refrain is symbolic: “Sing once again with me our strange duet. My power over you grows stronger yet...And though you turn from me, to glance behind, the Phantom of the Opera is there—inside your mind.”... Or is that cymballic?

n Raziah Ahmed is a registered financial consultant

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